split loan vs topup - how to fix

Discussion in 'Accounting & Tax' started by property_geek, 28th Aug, 2016.

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  1. property_geek

    property_geek Well-Known Member

    Joined:
    31st Jul, 2015
    Posts:
    239
    Location:
    Australia
    Hi everyone,

    My question is about tax implications on two types of arrangements.

    Scenario 1: I have an IP1 (loan amount 500k) that has 100k equity built up. I topup existing loan (make it 600k) and intend to use equity on expenses (such driveway/fence/tiles ) for other two under construction properties IP2(40k) and IP3(60k).

    Scenario 2: I take two splits so that now I have three loans 500k (IP1), 40k (IP2) and 60k (IP3). I spend two split equities on respective IPs.

    I know the 2nd approach is cleaner and preferred. However, I have already done 1st (I regret not doing 2nd). For tax filing I have to apportion the interest paid on 600k for all three IPs.

    How can I fix this problem? In long run I want to have 1-1 relationship between IP and loan so that no apportioning required.

    Considering:
    - All three are IP (no plan to make any of them ppor in short or long term)
    - All three are currently under construction.
    - I am okay to apportion interest in short term but want to fix this prob for long run.
    - No plan to sell in short term.
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

    Joined:
    18th Jun, 2015
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